Financial Management Test 2 - Chapter 7

Bond price = $27.50({1 − [1/(1 + .07/2)^10 × 2]}/(.07/2)) + $1,000/(1 + .07/2)^10 × 2 893.41

Werden Drilling offers 5.5 percent coupon bonds with semiannual payments and a yield to maturity of 7 percent. The bonds mature in 10 years. What is the market price per bond if the face value is $1,000?

coupon

Ana just received the semiannual payment of $35 on a bond she owns. This is called the ______ payment.

N=10*2 PV=-989.40 PMT=35 FV=1000 I/Y=3.575 YTM = 2(3.575%) = 7.15% r = 1.0715/1.022 − 1 r = .0484, or 4.84%

A $1,000 face value bond has a coupon rate of 7 percent, a market price of $989.40, and 10 years left to maturity. Interest is paid semiannually. If the inflation rate is 2.2 percent, what is the yield to maturity when expressed in real terms?

Bond price = $30({1 − [1/(1 + .055/2)^(13)^(2)]}/(.055/2)) + $1,000/(1 + .055/2)^(13)^(2)Bond price = $1,046.01 Bond price = $30({1 − [1/(1 + .057/2)^(13)^(2)]}/(.057/2)) + $1,000/(1 +.057/2)^(13)^(2)Bond price = $1,027.28 ($1,027.28 − 1,046.01)/$1,046.01 or -1.79%

A 13-year, 6 percent coupon bond pays interest semiannually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent?

maturity

A bond's principal is repaid on the ________ date.

face value

Dilan owns a bond that will pay him $45 each year in interest plus $1,000 as a principal payment at maturity. The $1,000 is referred to as the:

market price

The current yield is defined as the annual interest on a bond divided by the:

N=11*2 PV=-986 PMT=34 FV=1000 I/Y=3.4922 1.034922^2 − 1 .0711, or 7.11%

Goldfarb Paints has 6.8 percent coupon bonds on the market with 11 years left to maturity. The bonds make semiannual payments and currently sell for 98.6 percent of par. What is the effective annual yield?

Bond price = $28.75({1 − [1/(1 + .0832/2)^10 × 2]}/(.0832/2)) + $1,000/(1 + .0832/2)^10 × 2 827.81

Levrier Lighting has 5.75 percent coupon bonds outstanding that mature in 10 years. The bonds pay interest semiannually. What is the market price per bond if the face value is $1,000 and the yield to maturity is 8.32 percent?

I/Y=6.72/2 PV=-1023.46 PMT=35 FV=1000 N=25.052/2 or 12.53

MentonCo has 7 percent, semiannual coupon bonds outstanding with a current market price of $1,023.46, a par value of $1,000, and a yield to maturity of 6.72 percent. How many years is it until these bonds mature?

Bond price = $901.98 = C({1 − [1/(1 + .076/2)^13 × 2]}/(.076/2)) + $1,000/(1 + .076/2)^13 × 2 C = $32.00 ($32)(2)/$1,000 .0640, or 6.40%

Nazarian's has bonds on the market with 13 years to maturity, a YTM of 7.6 percent, and a current price of $901.98. The bonds make semiannual payments and have a face value of $1,000. What is the coupon rate?

I/Y=13.2 PV=-548 PMT=65 FV=1000 N=17.84

Rao Investments has 6.5 percent coupon bonds outstanding with a current market price of $548. The yield to maturity is 13.2 percent and the face value is $1,000. Interest is paid annually. How many years is it until these bonds mature?

Bond price = $51({1 − [1/(1 + .082/2)^(19)^(2)]}/(.082/2)) + $1,000/(1 + .082/2)^(19)^(2) $1,190.93

Syed Development issued 20-year bonds one year ago at a coupon rate of 10.2 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM is 8.2 percent, what is the current bond price?

yield to maturity

The bond market requires a return of 6.2 percent on the 15-year bonds issued by Mingwei Manufacturing. The 6.2 percent is referred to as the: